2022 (4) TMI 818 - AAAR - GST

Exemption from GST - relevant entry - Treated Water obtained from STP - purified water or not - eligible for exemption from GST by virtue of SI. No. 99 of the Exemption Notification No. 02/2017- Integrated Tax (Rate) dated 28 June 2017 or taxable at 18% by virtue of SI. No. 24 of Schedule -III of Notification No. 01/2017-Integrated Tax (Rate) dated 28th June 2017? - HELD THAT - On perusal of the facts of the case, it is seen that the impugned product, i.e., STP treated water, is obtained after carrying out various physical and biological processes on the sewage water. By carrying out the said physical and biological processes on the sewage water inside the Sewage Treatment Plant, the sewage water is made free from various organic and inorganic substances, such as suspended particles, grit, clays, pollutants like nitrogen, phosphorus, etc. However, even after carrying out the said physical and biological processes, water coming out from the Sewage Treatment Plant still contains various biological contaminants such as bacteria, virus, E. coli, along with other impurities. Thus, it can be safely concluded that the resultant water is not pure due to presence of the said impurities and foreign elements - Thus, it is adequately clear that water containing anything apart from the Hydrogen and Oxygen will not be construed as pure water. It is further observed that even potable water, which is fit for human consumption, will not be treated as pure water due to the presence of various minerals and ether elements like chlorine, which are added to it to kill the harmful micro-organisms that causes diseases. All these groups of specific water mentioned under the exclusion clause of the relevant entry are supplied in the packaged form, i.e., in the sealed container, in order to preserve their characteristics and specificity, while the same is not the case with the impugned product, i.e., STP treated water, which are supplied through pipelines without any such concerns - it is amply clear that the term purified , mentioned under the exemption clause of the relevant entry, will definitely not include the STP treated wager. Hence, the impugned product, i.e., STP treated water, is rightfully eligible for exemption under entry at Sl. No. 99 of the exemption notification no. 02/2017-C.T. (Rate) dated 28.06.2017.

Summary

Issues Involved:
1. Classification of "Treated Water" obtained from STP under GST.
2. Eligibility for exemption from GST under SI. No. 99 of the Exemption Notification No. 02/2017-Integrated Tax (Rate) dated 28 June 2017.
3. Applicability of GST at 18% under SI. No. 24 of Schedule III of Notification No. 01/2017-Integrated Tax (Rate) dated 28 June 2017.

Issue-wise Detailed Analysis:

1. Classification of "Treated Water" obtained from STP under GST:
The Appellant, engaged in the manufacture and sale of fertilizers and industrial chemicals, operates a Sewage Treatment Plant (STP) that converts sewage water into treated water for industrial use. The process involves multiple steps including removal of suspended particles, biological treatment, and reverse osmosis, resulting in water that is not fit for human consumption but suitable for industrial purposes. The treated water contains impurities such as bacteria, virus, and e-coli, distinguishing it from purified drinking water.

2. Eligibility for exemption from GST under SI. No. 99 of the Exemption Notification No. 02/2017-Integrated Tax (Rate) dated 28 June 2017:
The Appellant contended that the treated water should be exempt from GST as it is not "purified water" and falls under the general term "water" exempted by SI. No. 99 of the Exemption Notification. They argued that the term "purified" should be interpreted in the context of specialized uses such as aerated, mineral, distilled, medicinal, ionic, battery, and de-mineralized water, which are excluded from the exemption. The Appellant cited the Tamil Nadu AAAR ruling in the case of M/s. New Tirupur Area Development Corporation Limited, which held that treated potable water is not "purified water" and should be exempt from GST. The Appellant also emphasized that the treated water is not sold in sealed containers, aligning with the exemption criteria.

3. Applicability of GST at 18% under SI. No. 24 of Schedule III of Notification No. 01/2017-Integrated Tax (Rate) dated 28 June 2017:
The Maharashtra Authority for Advance Ruling (MAAR) had initially ruled that the treated water is "purified water" and taxable at 18% under SI. No. 24 of Schedule III. The Department supported this by stating that the processes undertaken by the Appellant effectively purify the water, making it fit for industrial use, thus falling under the taxable category. However, the Appellant argued that the treated water still contains impurities and does not meet the definition of "purified water" as intended by the exclusion clause.

Judgment:
Upon review, the Appellate Authority for Advance Ruling (AAAR) concluded that the treated water, despite undergoing various treatments, still contains impurities and cannot be classified as "purified water." The AAAR applied the principle of "noscitur a sociis" to interpret the term "purified" in the context of other specific types of water excluded from the exemption. The AAAR also noted that the treated water is supplied through pipelines and not in sealed containers, further supporting its exemption from GST. The AAAR emphasized the Government's intention to exempt general-purpose water from GST, aligning with the CBIC Circular No. 52/26/2018. Consequently, the AAAR set aside the MAAR's ruling and held that the treated water is eligible for exemption under SI. No. 99 of the Exemption Notification No. 02/2017-C.T. (Rate) dated 28 June 2017. The appeal filed by the Appellant was allowed.